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Corporate Taxation Flashcards Preview

How is shareholder basis calculated for a new interest in a Corporation?

Adjusted basis of property transferred + Gain recognized (if less than 80% ownership) - Boot received = Shareholder basis. If shareholders have 80% control after a property transfer, no taxable event occurs. If liabilities exceed basis on contributed property to a Corporation, a gain is recognized.

2

How is shareholder basis calculated for a TRANSFEROR of an interest in a Corporation?

Transferor's basis+ Gain recognized by shareholder= Basis

OR

FMV of Corporate Interest- Adjusted basis of property = Gain

3

What basis do shareholders and Corporations use for property?

They both use ADJUSTED BASIS, NOT FMV of property.

4

Describe how loss is taken on Section 1244 small business Corporation stock?

A loss on worthless stock is an ordinary loss.

5

What are the requirements for taking an ordinary loss on Section 1244 small business Corporation stock?

Taxpayer must be original stock owner, and either an individual or partnership

$50k (single) or $100k (MFJ) limit - remainder is a capital loss

Must have been issued in exchange for money or property (not exchanged for services)

Shareholder equity must not be in excess of $1 million

Both common and preferred stock is allowed

6

What are the basic rules for filing a form 1120?

Return is due regardless of income level

Return is due 3/15 if on a calendar year basis, or 2 1/2 months after end of fiscal year

An automatic six-month extension is available

7

When are Corporate federal tax estimated payments required, and how are they calculated?

Required if more than $500 in tax liability expected, or

100% current year liability

100% previous year liability

Note: If Corporation had more than $1 Million in revenue the previous year, the first estimated payment must be based on the previous year and the remainder based on the current year.